Commercial Data Systems curtails U.S. presence, lays off 20

After years of rapid expansion across the Mainland, Commercial Data Systems, Hawaii’s largest information technology firm, is limiting its presence to the Western United States, Pacific and Asia markets while maintaining its headquarters in Honolulu.

Commercial Data Systems recently laid off 20 employees — about a quarter of its staff — and closed its Herndon, Va., office near Washington, D.C.

CEO Mark Wong told PBN that the company, which offers hardware, software and consulting services, became too complex to manage with employees in 18 states even though it posted record sales of $90 million last year. Wong declined to disclose earnings for the privately held company.

“We had to make sure that we’re not spread too thin and really focus on what we do best,” he said. “It became very expensive having employees traveling to and from Hawaii, and it wasn’t worth all the complexity. We decided we had to cut back on our East Coast presence.”

He declined to say how much the cutbacks are expected to save. But following the cutbacks, Commercial Data Systems now has 65 employees — 35 in Hawaii, 24 in sales offices in California, Colorado, New Mexico and Texas, and six employees who work remotely to service clients on the East Coast. The 20 layoffs included nine employees based on the East Coast, eight in Hawaii and three from the West Coast.

The company, which was founded in 1986 with a focus on selling and integrating computer operating systems in Honolulu, evolved with the growth of the Internet and began installing Internet servers during the next decade. Then in the late 1990s, the company again evolved by aligning itself with big-name information technology manufacturers — such as Sun Microsystems, Hewlett Packard and Cisco — to be a reseller and distributor of computer hardware and software.

In 2000, Commercial Data Systems entered the Mainland market with the opening of a sales office in Albuquerque, N.M., which was followed by offices in Colorado, California and Texas. In 2007, Commercial Data Systems expanded to the East Coast and was eventually operating in a total of 18 states.

Following the lengthy recession, “we’re winding back to where we were three years ago,” Wong said.

Commercial Data Systems has found success in serving a mix of government and commercial clients, with a total of about 1,200 customers.

“As the company got more complex and more far flung, we had to have things like a full-time travel person to book travel arrangements for employees,” Wong said. “That’s now gone, and we have fewer sales people and less need for administration.”

Business experts say that rapid expansions can be a cash-flow drain on companies and strain management resources.

“Expansion requires additional working capital, not just a projected increase in sales,” said Mike Hulser, CEO and principal consultant of The Biz MD, a Honolulu management and financial consulting firm. “And doing business with people face-to-face and with those who share a common culture is a lot different compared to far-flung places, where business often has to be done over the phone or through e-mail. It presents a whole new level of stress on the company’s management.”

Mark Gilbert, who had joined the company in 1998 and served as president the last three years, stepped down during the consolidation, Wong said.

Gilbert, who had led the company’s expansion on the East Coast while working out of the main Hawaii office, could not be reached for comment. Gilbert has taken a position with Red River Computer Co. in Claremont, N.H.

Hulser said in some cases, as a company experiences increasing revenues and additional staff, its leadership needs can change.

“Companies grow to a certain point with the resources they have. Then, to go further, those resources are no longer appropriate. The leadership it had before is not what it needs going forward,” he said. “That can be a painful thing for companies to deal with.”

James Altamirano, who has been Commercial Data Systems’ director of sales in Albuquerque since 2001, has been named president. He is assuming the role from the New Mexico office, which serves as regional headquarters for the company’s Mainland efforts.

“In my new role with [Commercial Data Systems], I am looking forward to refocusing the company on what made us a successful IT solution provider in the past,” Altamirano said. “I plan on scaling the company back to geographic areas where we have always been successful. By scaling back we will be able to focus on our core IT partners to deliver comprehensive solutions to our customer base.”

Commercial Data Systems is still maintaining its corporate headquarters in Honolulu, where it owns 15,000 square feet of space in the Kukui Plaza at 50 S. Beretania St., and has retained corporate officers Guy Merola as chief financial officer and Roanne Abe as vice president of administration.

Commercial Data Systems plans to maintain its current client base while looking to increase its software services.

“We found our sweet spot in doing business in the Western U.S. and Hawaii and the Pacific and Asia, which includes Japan, Guam and Korea, and we want to continue to do business there and here,” Wong said. “We’ll be expanding some things as the computer industry continues to change and present new opportunities for us. For one, we expect to do more software services than we have in the past.”